Read our cookies policy.
Alternative optionsPrice cap on the total cost of credit – The benefits of a total cost of credit cap has been
looked at by the Personal Finance Research Centre at the University of Bristol. This report
highlighted that 17 EU member states have some form of price restriction. Their research was
ambiguous, on the one hand suggesting possible improved lending criteria and risk assessments.
On the other, prices may drift towards a cap, which could lead to prices increasing or lead to
a significant reduction in lenders exercising forbearance.55 Neither of these outcomes latter
would be beneficial for consumers. Clearly this is a very intrusive proposition and to ensure we
fully understand the implications we have committed to undertake further research once we
begin regulating credit firms and therefore have access to regulatory data.Cap on loan amount – Some American states have taken further steps to address inadequate
affordability assessments by setting caps on the maximum loan amount, either as a total
(e.g. $500) or as a proportion of income (e.g. 25% of income). However, the level of limits
chosen in these states has been criticised by the US consumer group the Centre for Responsible
Lending.56 This is because limits do not take into consideration the borrower’s other obligations
Rafter wrote: »
1) Bank overdrafts (authorised or unauthorised) need to be similarly capped so if you go overdrawn by £10 for a month the maximum you could be charged would be 24% (20% + 4%) so £2.40 instead of the £1 per day or £30 fee plus interest that is currently applied.
john1993 wrote: »
I susppect, if this was introduced, that you'd rapidly see banks simply refusing to allow any payments that resulted in an unauthorised overdraft, followed by accounts being closed.
This may not be popular with the people whose gas bills, loan payments, or council tax were previously being paid through this route.
Rafter wrote: »
Accept your point but just trying to be 'fair'. Why should a payday lender be 'capped' but a bank is allowed to charge a lot more for the equivalent loan.
Essential Money | Who & Where are you? | Work & Benefits | Household and travel | Shopping & Freebies | About MSE | The MoneySavers Arms | Covid-19 & Coronavirus Support